Fitch Rates America Movil's EUR750 Million and GBP300 Million Notes 'A'
MONTERREY, Mexico -- July 17, 2013
Fitch Ratings has assigned international scale ratings of 'A' to America
Movil, S.A.B. de C.V.'s (AMX) EUR750 million 3.259% senior notes due 2023 and
GBP300 million 4.948% senior notes due 2033. Proceeds from the issuances are
expected to be used for general corporate uses.
KEY RATING DRIVERS
The ratings incorporate AMX's diversified fixed and wireless operations across
Latin America, multiple service platforms, large scale, strong free cash flow,
ample financial flexibility, solid liquidity and sound financial profile. The
ratings take into account Fitch's expectation that management will maintain a
relatively conservative financial profile over the long term. A strong
competitive environment underpinned by increasing regulation in Mexico and
Colombia as well as declining prices in voice services temper the ratings.
AMX's geographical diversification results in 53% of EBITDA for the last 12
months ended March 31, 2013 was generated outside Mexico and more than 85% of
EBITDA comes from investment grade countries. In Fitch's view a strong credit
profile with committed credit facilities mitigates transfer and convertibility
risks. AMX leverage increased after the investments in Royal KPN NV (KPN) and
Telekom Austria (TKA) during 2012. Fitch does not anticipate any more cash
injections to KPN and TKA nor expect any dividends from them in the medium
term. AMX's recent participation in the KPN rights offering during May of 2013
resulted in a cash outflow for approximately EUR840 million.
Increased Regulatory Pressure
Fitch believes that AMX has flexibility to manage its capital structure and
leverage levels due to its cash flow generation and commitment to maintain a
sound financial profile given the current regulatory pressures in Mexico and
Colombia. The upcoming telecommunications law in Mexico is expected to become
enforced during this year once the secondary laws are passed by congress.
While the final outcome and effects on AMX are still uncertain, Fitch will
expect the outcome of the secondary laws to put some pressure on the Mexican
Regulatory issues in Colombia are expected by Fitch to have a slight negative
impact on AMX's operating results. Impact on Colombian operating results
should be minimal due to the recent enforcement of asymmetric rates as
interconnection revenues are low. In addition, the exclusion from the AWS band
auction and allowing AMX to participate only in the 2.5Ghz band should have a
minimal effect on capex given the actual tower coverage in Colombia.
AMX's credit quality is supported by its Mexican wireless and fixed units that
account for approximately 34% of revenues and 47% of EBITDA for the 12 months
ended March 31, 2013. The company's diverse revenue stream, generated by
wireless and wire line businesses outside Mexico, provides the company with
cash flow and currency diversification. Fitch views that a geographically
diversified portfolio of assets and services lowers business risk and cash
flow volatility. For the 12 months ended March 31, 2013 79% of EBITDA was
generated by Mexico, Brazil and Colombia. For this period, consolidated
wireless revenues accounted for approximately 64% of total revenues and the
remainder by fixed services.
Fitch expects AMX's net debt to EBITDA to remain stable during 2013 and to
trend slightly downwards during 2014. Long-term expectation of net debt to
EBITDA is to converge at approximately 1.2x. This level is slightly higher
than previous expectation of 1.0x; however, in Fitch's view the level is still
consistent with the rating category. For the 12 months ended March 31, 2013
America Movil's total debt to EBITDA was 1.6x, while net debt to EBITDA
approximated 1.4x. At March 31, 2013 total debt amounted to MXN401 billion
(USD32.5 billion) of which 97% is debt issued in the international and
domestic capital markets and approximately 90% has a fixed rate. America
Movil's currency risk exposure strategy is to have a net currency exposure to
match the majority of its cash flow.
Historically AMX has maintained a strong liquidity position. As of March 31,
2013 cash balances reached MXN37 billion and the company has unused committed
credit facilities for USD4 billion on top of cash from operations (CFO) over
the past 12 months of MXN187 billion. This favorably compares with maturities
for the next three years of MXN71.6 billion. In addition, the company's access
to capital markets and extended maturity profile adds to financial
Free cash flow is expected to remain strong over the medium term, underpinned
by stable capital expenditures in the next few years of approximately USD10.0
billion. Fitch believes cash flow from operations will be used to maintain a
conservative capital structure and to return excess cash flow, in the absence
of acquisitions, to shareholders in the form of dividends or share buybacks.
A positive rating action is unlikely given the actual leverage levels which
are high to historical levels. A negative rating action can be triggered if
net leverage increases between 1.5x-2.0x on a sustained basis due to
operational or strategic factors.
Fitch rates AMX as follows:
--Local currency IDR 'A';
--Foreign currency IDR 'A';
--Senior notes issuances 'A'.
--Mexican national scale rating 'AAA(mex)';
--Certificados Burstiles issuances with ticker symbols AMX 10, AMX 10-2 and
AMX 10U 'AAA(mex)';
--AMX senior notes 1122 due 2022 'A' and 'AAA(mex);
--30 Million UF-denominated Chilean Notes Program, including Series A and D
issuances for a combined amount of UF9 million, 'AA+(cl)'.
Additional information is available 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating Telecoms Companies' (Aug. 09, 2012);
--'Corporate Rating Methodology'(Aug. 08, 2012);
--'National Ratings Criteria' (Jan. 19, 2011);
-- Rating Non-Financial Corporates Above the Country
Ceiling'(Jan. 25, 2013);
--'Parent and Subsidiary Rating Linkage (Fitch's Approach to Rating Entities
Within a Corporate Group Structure)' (Aug. 08, 2012).
Applicable Criteria and Related Research:
Rating Telecom Companies
Corporate Rating Methodology
National Ratings Criteria
Rating Non-Financial Corporates Above the Country Ceiling
Parent and Subsidiary Rating Linkage
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.
Sergio Rodriguez, CFA
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612
John Culver, CFA
Elizabeth Fogerty, +1-212-908-0526
Press spacebar to pause and continue. Press esc to stop.